In her first budget address, Gov. Kristi Noem will discuss the under-funding of South Dakota nursing homes that has led to a recent wave of closures.

The governor’s speech that starts at noon Mountain Time is part of a growing momentum toward reform of nursing home funding during the ongoing legislative session in Pierre.

Three nursing homes closed over the past three years and two more are slated for closure next month, causing a loss of jobs and putting a hardship on displaced elderly and disabled residents and their families.

Another 17 former Golden Living Centers are facing financial challenges and are being operated by a state-approved receivership created after the New Jersey firm running the homes went bankrupt last year.

Industry officials say more closures are likely unless South Dakota improves its payment rate under Medicaid, which pays for the care of about 55 percent of the patients in the state’s roughly 110 nursing homes.

South Dakota has the lowest Medicaid reimbursement rate in the country, causing homes to lose $35 a day for each Medicaid patient and resulting in a $42 million overall annual funding shortfall for long-term care facilities across the state.

Randy Bury, president of the Evangelical Lutheran Good Samaritan Society that runs 32 senior care facilities in South Dakota including several nursing homes, said more homes are sure to close if state funding doesn’t increase soon.

“It’s not a risk of more closures, it’s a certainty,” said Bury, who became president of the society after its recent merger with Sanford Health. “It’s simple math. If you’re running a business and with over half of that business you’re losing money every day, you can Band Aid and cost cut and everything, but over time you’re going to end up in the red.”

Kristin Wileman, a spokeswoman for the governor, confirmed in an email Tuesday that Noem “intends to address nursing home funding and larger model of care issues in her budget address.”

Wileman did not provide specific details about what Noem will say or ideas she may put forward.

In a recent interview, however, Noem expressed a strong interest in helping nursing homes stay afloat. Noem said she was sad to see the recent closure of the nursing home in Bryant, the hometown of her husband, Bryon, where they have strong family connections.

“People want their families to be cared for and cared for in their communities close to them so they can be with them,” Noem said in an interview last month on WNAX Radio 570.

In that interview, Noem said the low Medicaid reimbursement rate is putting nursing homes at risk and that low pay is negatively affecting the ability of nursing homes to recruit qualified employees.

“If a big population in those nursing homes is on Medicaid, they’re losing money every day their doors are open,” Noem said. “They can’t recruit nurses and aides and doctors and professionals into those communities and pay them enough to be competitive.”

Noem, who will give her first budget address at 1 p.m. Central Time on Wednesday, hinted that she would support legislation to improve the financial stability of nursing homes both in small towns and urban areas.

“It is a concern,” Noem told the radio station. “It’s something I’m seriously looking at what we can do to continue to keep those services in our smaller communities. But … it’s not unique to a certain size of town or community in our state.”

Patient costs climb

The recent nursing home closures in Bryant, Rosholt and Tripp and pending closures in Madison and Mobridge have shone a light on the financial vulnerability of long-term care facilities in South Dakota.

Bury acknowledged that to some people the $181 per-day cost of care for a nursing home patient might seem high, and that he thought so, too, until he visited long-term care facilities.

Bury said that years ago nursing homes were more like clubhouses with mostly able-bodied residents. Now, he said, with greater patient access to health care and home care prior to arriving at a nursing home, residents come with more frequent and intensive medical needs that raise the cost far beyond providing room and board.

“The same facility that my parents went into looked very different,” he said. “Now, you see lots of people bed-bound, limited to a wheelchair and with serious medical conditions that take constant care.”

The Certified Nursing Assistants who do much of the basic patient care in nursing homes are generally underpaid, leading to extremely high position turnover and difficulty in attracting qualified employees, said Mark Deak, executive director of the South Dakota Health Care Association.

The average wage for CNAs in South Dakota is $12.47 an hour, or about $26,000 a year, the 46th lowest in the nation.

“We think the world of the CNAs; they’re really angels,” Deak said. “They do the heavy lifting and they’re there emotionally for the residents.”

Meanwhile, the thin margin at many nursing homes has reduced the ability of ownership to improve facilities. Most nursing homes in South Dakota are 40 years old, while the average in the Midwest is only 12 years old.

Deak has been meeting with lawmakers and other officials in Pierre to convince them to support meaningful and immediate funding reform for long-term care facilities across the state.

“This is a crisis that could turn into a statewide disaster if something isn’t done,” said Deak, who was scheduled to meet with Gov. Noem today to discuss the topic.

Deak said awareness of the nursing home funding problems has heightened across the state recently, in part due to the closure of several homes and due to reporting by South Dakota News Watch and other media.

Deak said that he has been encouraged by recent discussions with lawmakers and state officials that some form of legislation or a funding source to boost Medicaid reimbursements will be found this session.

“There’s a lot of rumblings and it’s on folks’ minds and I’m very encouraged by appropriators I’ve spoken to,” said Deak. “My hope is that they will muster the will and identify the resources to do that so they can to help the folks who care for our elderly or disabled residents.”

Funding options

Deak said early projections of a revenue surplus in state coffers in the coming fiscal year could provide an opportunity to raise the Medicaid pay rate. He also mentioned the possibility that the new revenues from sales taxes collected on online retail sales could be a source of funding for nursing homes.

Nursing homes and agencies that provide community services to people on Medicaid did receive a funding bump of about 2 percent over the past couple sessions, according to state Rep. Sue Peterson, R-Sioux Falls.

Peterson, who sits on the Joint Committee on Appropriations, said she is hopeful lawmakers can find a more permanent solution either by increasing funding for Medicaid providers or reducing regulations that remove flexibility from operators.

“We need to make sure we’re doing it in a magnitude so it makes a difference,” Peterson said. “It’s a matter of not only doing something about it, but also doing the right thing with reimbursement rates and regulations or a combination of both.”

Peterson said that when former Gov. Dennis Daugaard implemented a 10 percent funding reduction for all state departments shortly after taking office, Medicaid funding never rose back to pre-cut levels.

Peterson said money could be allocated by the Legislature in one of three basic ways.

A standalone bill to increase funding could be filed by a lawmaker prior to the Jan. 30 individual bill filing deadline or through a committee by Jan. 31.

A funding amendment could also be added to an existing bill throughout the session.

Peterson said a funding mechanism could also be inserted to the general spending bill that will be crafted by the Joint Appropriations Committee that then requires the approval of both chambers.

Any increase in state Medicaid funding likely would be matched at some level by the federal government, she said.

Peterson said she has studied Medicaid funding during her legislative career and supports funding reform for Medicaid service providers.

“I am keenly in tune to the problem, and very much focused on doing something about it,” she said. “I will use my position on the appropriations committee to try to right what is not right.”

If Gov. Noem indicates her support for increased funding for nursing homes and community service providers, it increases the chance money will be found, Peterson said.

“If the case is made and she supports it, we know it’s more likely to be signed when it gets to her desk,” she said.

Bury said he senses that lawmakers are beginning to understand the depth of the nursing care crisis in South Dakota and he remains optimistic funding reform will take place this session to provide more financial stability for nursing homes well into the future.

“Nobody is asking the government to come in and provide the profit margin or flip the scenario,” Bury said. “We’re simply asking the government to pay its fair share.”

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SD ranks last in Medicaid funding, group says

Nursing homes are essentially funded by two groups of patients, those who can pay full price on their own and lower-income patients whose care is paid for through the federal Medicaid and Medicare programs. Medicaid funding, which pays for more than half the nursing home residents in South Dakota, comes from both federal and state governments. South Dakota funds the program at the lowest per-patient rate in the nation, according to the South Dakota Association of Healthcare Organizations.

Here is how the state compares in per-day funding to neighboring states and to the daily cost of patient care.